IRS Issues Final Regulations on Opportunity Zones

The Internal Revenue Service has issued a long-awaited package of final regulations on the Opportunity Zones tax incentive that was created by the 2017 tax reform law. Opportunity Zones are intended to spur economic development in designated areas by allowing taxpayers who invest capital gains in qualified projects and meet various requirements to defer the taxation of the capital gain for up to seven years. It also allows them to permanently avoid paying tax on up to 15% of the reinvested capital gain, and, if the investment is held for 10 years or more, no tax is due on any appreciation on the project when it is ultimately disposed of.

The final regulations—which total more than 500 pages—combine two proposals that were issued and provide comprehensive guidance on the incentive, including important transition r elief for taxpayers who invested in good faith prior to the guidance being issued. ABA has been engaged with the IRS as it worked to develop these regulations, and a number of concerns raised by the association have been favorably addressed in the final rules. The association is currently reviewing the final regulations and invites members to submit any feedback.